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Miller faces multiple troubles
Is Miller Energy Resources Inc. in a struggle for survival?
That might be an overstatement, given the company’s substantial oil and natural gas production. But the Tennessee-based company clearly is under duress.
On April 29, Miller made a trio of significant disclosures.
First, it said it was in danger of being booted off the New York Stock Exchange because the average closing price of the company’s common stock had been less than $1 over a period of 30 trading days.
Second, Miller said it had received notice that the staff of the U.S. Securities and Exchange Commission had made a preliminary determination to recommend that the SEC “pursue a civil action against the company related to its 2009 Alaska asset acquisition.”
Third, Miller said it had engaged Global Hunter Securities to help execute a “capital repositioning.” Miller said it had liquidated its 2016 oil hedges, raising about $11.5 million in proceeds, and was “aggressively pursuing” cost reductions, throttling back capital expenditures and exploring asset sales.
Alaska-focused company More distressing news came on May 6, when Miller said its board of directors had voted to defer the cash payment of a quarterly dividend on the company’s preferred stock.
Miller included some reassuring remarks, writing in a press release: “Miller Energy believes that it has substantial asset value. Additionally, with its reduced debt and increased production as well as the recent improvement in oil prices, the company believes its fundamental outlook has improved.”
Miller is focused on Alaska, having sold off its legacy Tennessee oil and gas assets in November 2014.
The company made its Alaska entry in late 2009 when its subsidiary, Cook Inlet Energy LLC, acquired an assortment of assets out of the bankruptcy of California-based Pacific Energy Resources Ltd. These properties included the West McArthur River oil field and the offshore Redoubt unit and Osprey platform.
Since the Alaska acquisition, Miller has worked to rehabilitate and expand these fields and to acquire additional Alaska properties. In 2014, the company picked up the North Fork gas field on the Kenai Peninsula and a controlling interest in the Badami oil field on the North Slope.
Addressing the challenges Miller Energy said it will address and overcome the challenges confronting the company.
With regard to the possible NYSE delisting, Miller said it has six months to bring up its stock price and regain compliance with the exchange.
“The company intends to cure the deficiency and to return to compliance before the expiration of the six-month deadline,” Miller said, noting its stock would continue to trade on the NYSE in the meantime.
Miller’s stock closed May 6 at 59 cents. It was above $6 as recently as July 2014.
With respect to the SEC notice of a possible civil action against the company, Miller said: “The company is still seeking additional information on the factual basis for the proposed enforcement action before determining its formal response. Miller Energy welcomes the opportunity to respond before any action is taken and asserts that it does not believe that an enforcement action is warranted in this case.”
Miller’s 2009 Alaska asset acquisition has long been a point of some controversy.
The company in 2011 was hit with a swarm of lawsuits alleging fraud, with investors claiming Miller executives had overstated the value of the Alaska assets and violated accounting principles.
Miller defended its asset valuation. But in February, a federal judge in Tennessee approved a nearly $3 million settlement between Miller and shareholders.
AOGCC penalty Adding to Miller’s woes, the Alaska Oil and Gas Conservation Commission, in a May 1 order, imposed a $446,000 civil penalty against Cook Inlet Energy in connection with safety valve system violations at the Sword No. 1 well on the inlet’s west side.
Miller Energy does have some positives going for it, namely substantial oil and gas production. The company reported average daily production of 3,401 barrels of oil equivalent for the quarter ended Jan. 31.
For the remainder of calendar year 2015, Miller said it has approximately 90 percent of its expected oil production hedged at a weighted average price of $96.49 per barrel.
The company also said it expects to receive, by early June, the cash proceeds from a $33 million state tax credit application.
- Wesley Loy
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